UPDATE 2: Haha, I love it when predictions come true.  Looks like they're dropping the price to $2, and in the process got all those sales at $50 and $20, plus all the free shock-and-awe press coverage.  Well played Wolfram, well played.  Link to Gizmodo article. UPDATE: It seems that the Wolfram Alpha folks came across our post about the opportunity for sales and discounts due to their initial high price and have just reduced from $50 to $19.99.  Did you know the other reason to price high initially?  Because it creates a "premium" perception in the buyer's mind (clearly, this isn't the classic example since their website is free, but represents a similar concept). Read more about the discount via TechCrunch.  Download the app via iTunes here: If you have been anywhere near the tech/iPhone blogs in the last few days, you've more than likely come across various posts all covering the new Wolfram Alpha iPhone app from the same angle--it's $50 price tag being rediculously high.  Wolfram has come out and said that they defined the pricing strategy by dividing the price of a typical graphing calculator in half (hence, the $50).  We don't buy it for a second.  These guys are extremely intelligent and didn't just develop a pricing strategy willy-nilly after investing years of time and who knows how much money. By the way, Wolfram Alpha, for you uninitiated, is a "computational knowledge engine that draws on multiple sources to answer user queries directly."  In basic terms, it may help you mash up data/statistics or graph some of your favorite homework assignments.  Their website is probably the easiest way to understand what the tool does, so head on over and check it out here. Now, let's break down this pricing strategy from a marketing perspective, not just the user perspective, and uncover the method to their seeming madness:

Promoting App Discovery:  Create An Angle

What's the first problem for any Developer after the app is approved by Apple?  Yep, you guessed it, promoting awareness (though we like to take it a step further and promote discovery, more info here <hyperlink to website homepage>).  Outside of the typical press releases and branded apps (e.g., Rock Band), your app needs an "angle", something that an app reviewer, TechCrunch, or the Giz can use as fodder to write a story about.  You've heard the phrase, "no PR is bad PR", except for maybe Pepsi's AMP-branded Before You Score app fail (that's a topic for another post altogether).  Well, in this case it works because it's spreading across the iPhone/Gadget blogosphere like wildfire.  The lesson here:  create an angle for media outlets to talk about your app, but be sure it's consistent with your brand image and isn't going to degrade half of the population (the Golden Rule comes to mind folks).

Optimal Revenue Extraction:  Fundamental Pricing Economics

If you've been to business school, or happened to stay awake for that Monday morning Economics class during undergrad, you may remember a concept I like to call Revenue Extraction.  The premise is that you want to charge every individual customer one penny below the exact price where his or her demand falls off.  In simpler terms, you want to charge people the most they're willing to pay.  Clearly, at $50, this Wolfram app is at the 99th percentile in terms of price (only 90 apps at the time of this writing priced at $49.99, out of 91,000 currently available in the app store), but consider the fact that some people are actually downloading it, including the developer of the popular Tweetie & Tweetie 2 apps (not that he's hurting for spare change).  This means that these customers are willing to pay $50, and possibly more.  The beauty of this strategy is as initial sales start to fall off and stagnate, you can drop the price and promote SALE, SALE, SALE. We already know what you're thinking, "won't the people at the higher price be mad when it's now on sale?"  Well, we have three responses:

1. First, these aren't your typical $1.99 customers who will whine and cry because the app that took you 3 months to build simply isn't cheap enough.  No, these customers have the money and will likely not even notice or if they do, won't care that the app went on sale.
2. Second, consider the number of initial customers at the $50 price.  Once again, simple economics states that the quantity demanded will be less as price increases (unless the demand curve for this app is perfectly elastic, which it most definitely is not).  So, you have an extremely small number of customers (compared to the large spike once the sale hits) and even if they do submit negative ratings on the price drop, how is that going to affect potential future users when they're the ones getting a price break?
3. Third and finally, the $50 initial price allows a huge amount of room for multiple levels of sales and discounts.  If your app is only priced at $1.99, you can only drop the price to $0.99 or free (and free isn't helping you much).  The future strategies you can use are seemingly endless, considering discounts, in-app purchasing, extra features and content.

So, we applaud you Wolfram Team, for taking the time to consider and understand the governing dynamics of marketing within the app store.  And one final point to all you readers hungry for knowledge:  there are four five Ps in the marketing equation, not just one:

• Price
• Place
• Product
• Promotion
• People (don't forget this very important, often left out one)

They come together to form your app's unique positioning.  The more you know...